FTSE 100 Holds Steady as Euro Tumbles Amid Weak PMI Data

Forex

London’s FTSE 100 saw an afternoon recovery, closing higher on Monday despite disappointing global PMI figures.

The FTSE 100 index finished the day up 29.72 points, or 0.4%, at 8,259.71. The FTSE 250 edged up by 13.28 points, or 0.1%, to end at 20,451.82. However, the AIM All-Share dipped by 1.30 points, or 0.2%, to close at 744.32.

The Cboe UK 100 rose 0.2% to 825.65, while the Cboe UK 250 saw a slight decline to 18,356.82. The Cboe Small Companies index improved by 0.3%, ending at 16,827.67.

In Europe, Paris’s CAC 40 gained 0.1%, while Frankfurt’s DAX 40 increased by 0.6%.

In London, data showed the UK private sector remained in growth territory this month, although the pace of growth slowed across the board.

The UK’s composite Purchasing Managers’ Index (PMI) dropped to 52.9 in September, down from 53.8 in August. This is the lowest reading in two months but still above the 50-point threshold that separates expansion from contraction.

The composite PMI is based on data from the manufacturing and services sectors.

The flash manufacturing PMI fell to 51.5 in September, down from a final reading of 52.5 in August. The services PMI also dropped, from 53.7 to 52.8. These results represent a three-month low for manufacturing and a two-month low for services.

“UK private sector businesses reported a sustained increase in activity in September, marking 11 consecutive months of growth. However, a slowdown in output from both manufacturing and services indicates that the overall pace of recovery has moderated for the first time since June,” said S&P Global, the survey compiler.

Rob Wood, an analyst at Pantheon Macroeconomics, noted that businesses were waiting to see what measures would be included in the upcoming autumn budget.

UK Chancellor Rachel Reeves is set to present the budget, the first from the new Labour government, on October 30. It will be accompanied by a full fiscal statement from the Office for Budget Responsibility.

Looking ahead, Wood commented, “Strong growth in new orders and business optimism suggests the PMI will likely rebound once the uncertainty surrounding the budget clears.”

Chancellor Reeves has promised that the budget will be “ambitious,” aiming to repair economic foundations, deliver the promised changes, and rebuild Britain.

Addressing the Labour Party conference in Liverpool, Reeves assured there would be no “return to austerity.”

“Yes, we must manage the legacy left by the Conservatives, which includes some tough choices, but I will not let that dampen our ambitions for Britain,” she stated.

In Europe, the outlook appeared much bleaker.

Eurozone private sector growth slowed in September, while the manufacturing sector continued to falter, according to PMI survey results.

The Hamburg Commercial Bank’s flash composite PMI fell to 48.9 in September, down from 51.0 in August.

The manufacturing PMI dropped to 44.8, a nine-month low, from 45.8 in August. The services PMI hit a seven-month low, falling to 50.5 from 52.9, but remained in growth territory.

“The overall decline in business activity was driven by an intensifying slowdown in the eurozone’s manufacturing sector, where output contracted for the 18th consecutive month at the fastest pace seen so far this year. While services activity continued to rise, the latest expansion was marginal and the weakest since February,” S&P Global stated.

ING economists commented, “The optimism in the eurozone has faded, much like the extinguishing of the Olympic flame.”

“After a strong uptick in August, the PMI saw a steep decline in September, sparking concerns over EU growth as inflation worries begin to ease.”

Michael Brown, a market analyst at Pepperstone, highlighted that Monday’s data emphasized the European Central Bank’s future interest rate expectations.

“This morning’s dismal eurozone PMI figures suggest the market is still underestimating the likelihood of successive ECB rate cuts.”

The figures weighed on the euro, while the British pound gained ground.

Sterling was trading at USD 1.3357 at the close of London stock markets on Monday, up from USD 1.3307 at Friday’s close. The euro slipped to USD 1.1135, down from USD 1.1164.

Against the yen, the dollar traded at JPY 143.77, slightly down from JPY 143.85 on Friday.

Stocks in New York were up as London markets closed, with the DJIA gaining 0.1%, while the S&P 500 and Nasdaq Composite both rose 0.3%.

US PMI data painted a mixed picture, with services continuing to expand while manufacturing contracted further.

S&P Global’s flash US composite PMI registered at 54.4 in September, down slightly from 54.6 in August. Remaining above the 50-point threshold, the data showed that growth remained fairly resilient month-over-month.

The composite measures both manufacturing and services, though only the latter showed growth.

The flash services PMI slipped to 55.4 from 55.7, but still beat market consensus, which had predicted a reading of 55.2 according to FXStreet.

Meanwhile, the flash manufacturing PMI plunged to a 15-month low of 47.0 from 47.9, indicating worsening contraction. The reading fell short of market expectations, which forecast 48.5.

On London’s FTSE 100, Kingfisher shares rose 1.6% after UBS upgraded the stock from “sell” to “neutral.”

On Monday, the London-based DIY retailer, which owns B&Q, Castorama, and Screwfix, also announced the start of a GBP 75 million share buyback program, expected to be completed by November 22.

This is the fourth tranche of the GBP 300 million share buyback plan Kingfisher announced in September 2023.

Marks & Spencer saw a 1.8% rise, as UBS initiated coverage with a “buy” rating, but B&M shares dropped 2.6% as the same broker issued a “sell” recommendation.

Rightmove shares gained after the Australian firm REA made another bid to acquire the online real estate portal.

The new offer values Rightmove’s equity at GBP 6.1 billion. The deal includes 341 pence in cash plus 0.0422 new REA shares. Based on REA’s closing price on Friday, the offer values each Rightmove share at 770 pence.

Despite the news, Rightmove shares rose only 0.8%, remaining well below the offer price.

AJ Bell’s Russ Mould said the market’s reaction “tells you all you need to know.”

“At the current offer price, this deal is unlikely to go through, given that the shares are trading  below REA’s offer,” he noted.

Mould said that to acquire a market leader, “you need to pay a premium,” adding that the higher offer still doesn’t seem “generous” enough.

“Shareholders are likely to pay more attention if the offer starts with an eight rather than a seven, so while the latest 770p bid is a step in the right direction, it probably won’t be sufficient,” he concluded.

Burberry shares fell 0.9% after Bank of America reiterated its “underperform” rating and cut the target price to 475p from 700p.

BofA warned that the luxury goods consumer is “tapped out” and expects the “modest” revenue growth in the sector to continue through the second half of 2024 and into 2025, putting pressure on margins and preventing EBIT growth.

The broker explained that the recent downturn was largely due to the Chinese consumer, who had been the only source of revenue growth in the first half of the year.

Elsewhere in London, Alphawave IP shares tumbled 14%.

The high-speed connectivity solutions provider now expects 2024 revenue to range between USD 310 million and USD 330 million, down from the previously projected USD 345 million to USD 365 million announced in March.

Earnings before interest, tax, depreciation, and amortization (EBITDA) are expected to come in at USD 50 million, lower than the earlier forecast of USD 70 million.

Alphawave said the revised outlook reflects the impact of the merger between two major AI sector clients in Korea on its first-half results.

In the first half of 2024, Alphawave’s pre-tax loss ballooned to USD 49.9 million from USD 6.6 million a year earlier, as revenue more than halved to USD 91.0 million from USD 187.2 million.

Brent crude was priced at USD 73.80 per barrel at the close of London stock markets on Monday, down from USD 74.43 on Friday.

Gold was priced at USD 2,630.09 per ounce at Monday’s London close, up from USD 2,622.00 at Thursday’s close.

Tuesday’s UK corporate calendar includes annual results from engineering firm Smiths Group and half-year figures from car and home insurer Direct Line.

Globally, the economic calendar features an interest rate decision from Australia, Germany’s business climate report, and US consumer confidence data.

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